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Bonus Question. (15 extra points) The first fundamental theorem of welfare economics fails if there are missing market. Expla
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The first theorem of welfare economics fails since it is based on the unreasonable assumptions such as existence of large number of buyers and sellers having perfect rationality and perfect information.This assumption doesnot exist in the real world and thus the fundamental theorem of welfare economics fails.

The market fails to exist for some goods due to the nature of goods being exchanged like if the good is public good wherein sellers are unable to exclude non buyers from using the product and this leads to underinvestment since developers are not able to extract full benefits of the development .A example of this is new method of harvesting.

Another reason for market failure is a traffic congestion that exist in case of public roads where entire population uses it and act as a complement to the cars because of the low cost and high benefit associated with the use of roads it becomes congested thus decreasing the usefulness to the society .

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